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There are several investment options for generating passive income from your $100,000 investment. From active, hands-on approaches to automated ones, here are 5 ways for how to invest 100k:
Investing your 100k in individual stocks or ETFs has historically proven to be one of the most profitable options. Depending on your goals and risk tolerance, you can invest in index funds or take a risk with a small percentage of your account and consider riskier ETFs and stocks.
With $100,000 you can build a diverse portfolio or add to an existing one you want to emphasize. Your money can grow dramatically long term and quickly even in shorter periods. Here’s a look at how it might grow in three common investment classes.
|$100,000 saved or invested||Savings account||Bonds||Stocks|
For this table we assumed:
Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.
Robo-advisors are algorithms that automatically invest your money on your behalf based on parameters that you set, such as your risk tolerance. This gives you the opportunity to invest 100k in the stock market without doing tons of research.
Spending your entire $100,000 on a property is a high-risk investment with no diversification. REITs solve this problem. Invest as much as you want in a REIT, but typically, the minimum is $5,000, which comes out at 5% of your $100,000.
No matter your age, you should contribute to your retirement account until the time comes to reap the benefits. Assuming you already maxed out your 401(k), you can now max out your IRA account. The maximum contribution for an IRA in 2023 is $6,500 — or $7,500 if you’re 50 or older. An IRA offers a higher variety of investment options than a 401(k).
Alternative investments, such as non-fungible tokens (NFTs), historic works of art, collectibles and more, are another way of diversifying your portfolio. However, these assets typically come with high risk and high rewards.
This strategy requires a similar approach as for passive income, but your goal should be long-term. This means you invest your 100k in the same assets but hold them for 20 years or more to reach $1 million.
An alternative approach is to invest in riskier assets and stocks. Blue chip stocks are typically the largest companies with a strong balance sheet but are unlikely to appreciate 10 times in a short period.
Small-cap companies can either be bought by larger companies — often at a higher price than the market price — or grow to become large-cap companies if they offer great and competitive products or services. Finding such companies requires a good amount of research, though.
Before you figure out where to invest 100k, it’s important to have a goal in sight.
Investors who want a hands-off approach to investing with minimal intervention would find robo-advisors a decent option. These computer algorithms trade on your behalf and continuously rebalance your portfolio for a minimal annual fee.
Investors who prefer to do the work themselves are likely better off with individual stocks and ETFs, including real estate investment trusts (REITs) — a great option for investors regardless of their risk tolerance.
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